Athletes look not to fumble earnings with injury insurance

Insurer PFS protects athletes' future pay against sports injury

Teams “are insuring individuals for the equivalent of commercial airplanes,” says Dan Burns, president of PFS.

Like most football fans, Dan Burns spends Sundays in the fall on the edge of his seat watching nerve-racking finishes to each week's NFL games. But he has a different reason to bite his nails.

“We hold our breath when we see the golf cart come out on a football field,” he says. “We know that's where the exposure is.”

Burns is president of Pro Financial Services, one of just a handful of companies nationwide that sell high-value insurance policies protecting athletes from the loss of future wages if they get hurt.

Nearly every player projected to be drafted in the first three rounds of the NFL draft, taking place at the Auditorium Theatre April 28-30, has purchased customized insurance protection, including many “loss of value” policies from which they will collect if drafted far lower than expected due to injury or illness. Several of those policies are underwritten by 36-year-old PFS, headquartered in the West Loop.

Paying to hedge against major injuries or events that drastically lower income potential has become more popular among pro athletes in recent years. The main reason: Player contract values have skyrocketed across all sports with a boom in the fees that teams get from broadcasting rights.

That has meant a surge of high-risk, high-reward business for PFS, whose policies cover both the athletes seeking to guarantee portions of upcoming contracts and the teams that are committing small fortunes to them.

Teams “are insuring individuals for the equivalent of commercial airplanes or office buildings now,” says Burns, who estimates the company's premiums have increased by 50 percent over the past five years. “You're pretty much in a day and age where every team has one if not two superstars that make eight figures a year—and close to nine figures for a full contract.”

Missing half of a football season could easily equate to a $5 million insurance payout for a player. It's not uncommon for NFL players to be insured for between $300,000 and $500,000 per game. Many baseball players are insured at $100,000 per regular-season day.

Top college football players entering their draft-eligible years and established pros on the verge of signing big free agent contracts often pay between $5,000 and $15,000 per $1 million of coverage for a single year, looking to guarantee that anything from a torn ACL to a dislocated elbow won't completely ruin their next big payday.

Those premiums are separate from standard disability insurance, which all players have and which only helps recover portions of current contracts after injuries. Loss of value coverage, offered by PFS and such competitors as Lloyd's of London and Houston Casualty, is designed to protect upcoming financial windfalls.

But while PFS enjoys the spoils of booming contract values and more players buying policies, the headwinds are getting stronger as the spotlight gets brighter on the long-term effects of concussions—just last week a federal appeals court approved a $1 billion settlement that would pay out to former and current players specifically around concussion injury concerns.

AN EVOLVING, TRICKY ISSUE

With rapidly evolving and differing practices about how much time or value a player loses from head injuries, assigning values to concussion-related incidents is far more difficult and highly contentious, says former Chicago Bears linebacker Hunter Hillenmeyer, who purchased a loss of value policy during his third year in the NFL.

“The science (of concussion effects) is still evolving so much, and I think that makes it really tricky for insurance purposes,” says Hillenmeyer, whose career ended early because of concussion concerns. “Players will get huge concussions, and that will affect their value on the free agent market. But it's almost impossible to prove that.”

Burns, who declines to disclose financial specifics but says PFS' annual revenue is between $50 million and $100 million, says the company is well-insulated from a potential wave of concussion-related claims because it has a diverse portfolio of policies in different sports. That includes baseball, where contract values are far larger on average.

But as more research is done on concussions and the effects of subconcussive blows on athletes' ability to both play and live normal lives after their careers are over, more players may start pushing for specific loss of value coverage tied to them.

That could force insurers like PFS to assume the risk with insufficient data on concussion frequency and evolving opinions about their impact, says Keith Lerner, who sells loss of value policies on behalf of Gainesville, Fla.-based Total Planning Sports Services.

That's why increased emphasis on documenting and treating concussions isn't just for player safety—it's also vital information to the insurance companies covering them.

“The bigger issue is when players don't want to report (concussions), don't go to the trainer, don't seek treatment and have had multiple concussions. Then, all of a sudden, their career is over and they're trying to make a claim on a policy but (they) only have one documented concussion,” Lerner says. “The approach has been much more proactive in the last 12 to 24 months in both the NFL and NCAA—making sure that, if a player has had a concussion, that there's a protocol and everything is followed to a T.”